Creating financial reports that speak to the real reasons donors give to charity

Untitled design 25 | Creating financial reports that speak to the real reasons donors give to charity
By Toby Lester | 17th June 2019 | 9 min read

Why do you give to charity? If you ask somebody out of the blue, they’re likely to tell you what they think you want to hear – perhaps that they give because it’s the right thing to do, or because people are in need.

While, no doubt, some people do have a selfless motivation, there are other motivating factors at play. The real question is, which of these factors is most influential – and do your reports fulfil these motivations?

Is altruism real?

Altruistic behaviour describes the things that we do for other people’s benefit without any profit to ourselves. Sometimes, this may even be to our detriment – for example, when we give away our time or money.

Many people claim that the impulse to give to charity is purely altruistic. However, this is difficult to definitively identify and prove, so making sure your reports resonate with everyone is paramount.

Behavioural science experiments could provide an answer. With this knowledge, charities can pitch their financial reports in a way that speaks to donors’ real motivations.

Dictator games

The dictator games experiment could prove the existence of true altruism. Participants are placed in pairs with a partner they have never met before. One of this pair is the ‘dictator’ and decides how to share out a sum of money between the two participants.

Perhaps unsurprisingly, most dictators chose to keep all of the money. However, the second highest group of participants divided the money in a 50/50 split (Fehr and Schmidt, 1999).

The fact is, while the immediate assumption might be that humans are motivated by entirely selfish reasons, many of us genuinely do want to give to other people. However, there is also a second layer of decision-making to charitable giving: trust.

The trust game

A further dictator game experiment was undertaken, but with an additional twist. The dictator is told that the money they give to the other participant will be tripled and that, if they choose, the other participant will be able to send some of this increased sum of money back to the dictator.

Unexpectedly, the game often ends with both participants choosing to trust each other and send large sums of money. Once the dictator has invested in the other participant, they are very willing to send a fair amount of money back – showing the importance of accurate reporting to build trust in charitable brands.

The reason for this seemingly altruistic behaviour may be inequity aversion.

Inequity aversion

Simply put, people who experience inequity aversion try to overcompensate for inequalities. In our trust game example, these people will send large sums of money to balance the scales. This is the reason that the trust game often ends in a 50/50 split; because, at their core, most people want to promote universal fairness and equality.

Importantly, this behaviour hinges on a central narrative: that there is a human on the receiving end of the money who will benefit from it. Narratives are important to altruistic or inequity-averse people; if the scale of a charity’s mission is too large, donors can’t see the forest for the trees.

With accurate reporting, you can create clear accounts of how donor’s money has helped address inequalities, with reference to the real people on the receiving end of this help. However, anyone who has tried to assemble a report for a charitable organisation knows how difficult it can be to get reliable, meaningful statistics.

Building effective narratives

Narratives build the trust that is essential to not-for-profit organisations. Inequity-averse people need to see where their money will be spent. This is where facts and figures come in.

Charity’s financial data exists in multiple, unreconciled documents, making it impossible to get up-to-the-moment, reliable statistics. However, with IRIS Financials’ unified ledger software, all of your financial data is recorded in the same place, where it is automatically updated and reconciled.

It’s then easy to extract the statistics you need with unlimited dimensions of analysis, unlocking new trust-building possibilities for your brand. If you want to convince inequity-averse donors to commit to your charity, visit our website to find out how IRIS Financials can help your charity to build reliable, trustworthy narratives.